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TMI Blog1952 (12) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... lied for and was allotted 5,000 ten-rupee shares Nos. 15048 to 20047 on which Rs. 5 per share had been paid. The company continued to act as the managing agent of the mills till the 30th June, 1939, on which date it resigned the managing agency. Prior to the company's resignation the two members of the company had entered into an agreement with one M. A. Palaniappa Chettiar, a partner of the incoming managing agency firm, upon certain terms which need not be referred to in greater detail. Within two months after the change of managing agents, the mills made two calls, namely, one on the 22nd August, 1939, for Rs. 2 per share payable on the first October, 1939, and the other on the 1st October, 1939, for Rs. 3 payable on the 1st December, 1939. The company did not pay either of the calls. On the 23 rd January, 1940, Govindaraju Chettiar was adjudged insolvent on the application of Sundara Ayyar. This insolvency of Govindaraju Chettiar was eventually annulled in 1944. During this period Govindaraju Chettiar, in law, ceased to be a director of the company, although it is alleged that he nevertheless continued to take part in the management of the company. By a resolution of the boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int Stock Companies the company was struck off the register of companies under section 247 of the Indian Companies Act. This order of the Registrar was published in the Official Gazette on the 9th September, 1941, i.e., four days after the shares were forfeited and one day before the notice intimating the fact of forfeiture was sent in a registered cover which was, however, returned undelivered. Under section 247(5) of the Indian Companies Act the company stood dissolved on and from the date of such publication. The mills having come to know of the dissolution of the company applied to the High Court (O.P. No. 10 of 1942) praying that the name of the company be restored to the register of companies and that after such restoration was duly advertised the company be wound up by the court. A similar application was made on the 11th December, 1941, by the income-tax authorities (O.P. No. 11 of 1942). On the 23rd February, 1942, Sundara Ayyar filed an affidavit contending, amongst other things, that the directors of the mills had no power to forfeit the shares. On the 2nd April, 1942, however, O.P. No. 10 of 1942 was compromised, and the mills received Rs. 11,000 from Sundara Ayyar in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said register in respect of 5,000 shares numbering 15048-20047 and why such other alternative or consequential relief should not be granted to the applicant as might be just and necessary in the circumstances of the case. The mills contended, in opposition to that application, that the shares had been properly forfeited, that the company was, on the principles of estoppel, acquiescence and laches, precluded from challenging the forfeiture, that the application was barred by limitation and that the shares having already been allotted to other persons, who had not been made parties to the application, no order for rectification of the register in respect of those shares could be made. The summons came up for hearing before Mr. Justice Clark. The learned Judge, by his judgment dated the 15th November, 1946, held that the notice dated the 15th March, 1941, which was posted on the 17th March, 1941, and delivered on the 20th March, 1941, and on which the resolution of forfeiture passed on the 5th September, 1941, was founded, was not in conformity with the provisions of articles 29 and 30 of the articles of association of the company which required 14 clear days notice. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason of the irregularity the forfeiture was only voidable and not void and that as the forfeiture was only voidable it was open to the company to waive or abandon its right to dispute the validity of the forfeiture and that in fact, by its conduct, it had done so, that the claim to rectify the register was barred by limitation and that in any event rectification was impossible because the shares were not available in specie, the same having been re-allotted to other persons. The learned Judges by their judgment dated the 11th March, 1949, held that the forfeiture was invalid, that the application was not barred by limitation, for it was covered by article 120 of the Limitation Act. The learned Judges recognised that where a period of limitation was prescribed for a suit or a proceeding mere delay was no bar unless it was of such a character as would lead to an inference of abandonment of the right or unless it was established that the person against whom the action or proceeding was instituted was actually prejudiced by reason of such delay. The learned Judges agreed with the trial court that no plea of acquiescence, waiver or estoppel had been established in the present case. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in support of this appeal, has assailed the soundness of both these grounds. The learned Attorney-General contends, not without considerable force, that having, in agreement with the trial court, held that no plea of acquiescence, waiver or estoppel had been established in this case, the appeal court should not have allowed the mills to raise the question of abandonment of right by the company, inasmuch as no such plea of abandonment had been raised either in the mills' affidavit in opposition to the company's application or in the mills' grounds of appeal before the High Court. Apart from this, the appeal court permitted the mills to make out a plea of abandonment of right by the company as distinct from the pleas of waiver, acquiescence and estoppel and sought to derive support for this new plea from the well known cases of Prendergast v. Turton, Clarke & Chapman v. Hart and Jones v. North Vancouver Land and Improvement Co. A perusal of the relevant facts set out in the several reports and the respective judgments in the above cases will clearly indicate that apart from the fact that some of them related to collieries which were treated on a special footing, those cases were r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the advertisement of the 30th of May, 1869. In this case, as in that of Prendergast v. Turton, the plaintiff's interest was executed. In other words, he had a legal interest in his shares, and did not require a declaration of trust or the assistance of a court of equity to create in him an interest in them. Mere laches would not, therefore, disentitle him to equitable relief: Clarke and Chapman v. Hart. It was upon the ground of abandonment, and not upon that of mere laches, that Prendergast v. Turton was decided." Two things are thus clear, namely, (1) that abandonment of right is much more than mere waiver, acquiescence or laches and is something akin to estoppel if not estoppel itself and (2) that mere waiver, acquiescence or laches which is short of abandonment of right or estoppel does not disentitle the holder of shares who has a vested interest in the shares from challenging the validity of the purported forfeiture of those shares. In view of the decision of the courts below that no case of waiver, acquiescence, laches or estoppel has been established in this case it is impossible to hold that the principles deducible from the judicial decisions relied upon by the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of directors of the mills. The reason for opposing the restoration of the company may well have been that Sundara Ayyar desired, at all cost, to avoid his eventual personal liability as a shareholder and director of the company. In any case, Sundara Ayyar did make it clear that he challenged the validity of the purported forfeiture of shares by the mills and in this respect this case falls clearly within the decision in Clarke's case relied upon by the appeal court. The only other conduct of Sundara Ayyar relied on by learned advocate for the mills in support of the appeal court's decision on this point is that Sundara Ayyar proceeded with his suit against Palaniappa Chettiar even after his suit as well as his appeal had been dismissed as against the mills. In that suit Sundara Ayyar sued the mills as well as Govindaraju Chettiar and the Official Receiver of Salem representing the latter's estate and Palaniappa Chettiar. In the plaint itself the validity of the forfeiture was challenged. The claim against Palaniappa Chettiar was in the alternative and it was founded on the agreement of the 30th June, 1939. The suit was dismissed as against the mills only on the technical ground t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 38, give notice to the persons to whom the shares had been re-allotted or those claiming under them and make them parties to the proceedings and then make an appropriate order for rectification and, if necessary, also direct the mills to pay damages under that section. This being the situation learned advocate for the mills had to decide upon his course of action. What happened in court will appear from the following extract from the judgment of the trial court:- "It is agreed by both parties that the proper order will be for the applicant company to be placed on the register in respect of 5,000 of the unissued rupees 10 shares and I order accordingly. In this case as the parties consent to the matter being disposed of by allotting to the applicant unissued shares, there can, it seems to me, be no order for payment of the dividends. Counsel for the respondent company leaves the solution of this difficulty to me........................................ The suggestion of the applicant company is that it is prepared to forego any claim to the accrued dividends if it is not required to pay interest on the out standing call money. This seems to me to be a very reasonable suggestion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contentions were overruled and the learned Judge thought that not withstanding the difficulty in the way of granting the relief for rectification the applicant company should be restored to the register, the only shares available being the 16,000 shares of Rs. 10 each unissued, the applicant company could be recognised as a shareholder in respect of 5,000 out of those shares.............................." It is quite clear from the judgment of the trial court, paragraph 5 of the junior advocate's affidavit and the statement of the learned senior advocate as recorded by the appeal court that the agreement was solely and simply as to the specific form of the order, without prejudice to the mills, right to challenge the correctness of the findings of the trial court on the material issues. In other words, all that learned advocate for the mills desired to guard himself against was that the agreement should not preclude the mills from preferring an appeal against the decision of the learned Judge on the merits. The reservation was as to the right of appeal challenging the findings on the merits and the agreement was only as to the form of the order. This limited agreement certainly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... winding up order, March 26, 1926. The application of the Liquidators was made on March 26, 1928, well within the three years. The result is that from either point of view the application by the liquidators, if otherwise properly made under and within the provisions of section 186 of the Indian Companies Act, is not one which must be dismissed by reason of section 3 of the Indian Limitation Act. It is either an application made within time, or it is an application made for which no period of limitation is prescribed. The case may be a casus omissus. If it be so, then it is for others than their Lordships to remedy the defect " Learned advocate for the mills, however, points out that the reason for holding that article 181 was confined to applications under the Code was that the article should be construed ejusdem generis and that, as all the articles in the third division of the schedule to the Limitation Act related to applications under the Code, article 181, which was the residuary article, must be limited to applications under the Code. That reasoning, it is pointed out, is no longer applicable because of the amendment of the Limitation Act by the introduction of the present ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly would not have affected the meaning of that article. If, however, as a result of judicial construction, those words have come to be read into the first column as if those words actually occurred therein, we are not of opinion, as at present advised, that the subsequent amendment of articles 158 and 178 must necessarily and automatically have the effect of altering the long acquired meaning of article 181 on the sole and simple ground that after the amendment the reason on which the old construction was founded is no longer available. We need not, however, on this occasion, pursue the matter further, for we are of the opinion that even if article 181 does apply to the present application it may still be said to be within time. The period of limitation prescribed by that article is three years from the time "when the right to apply accrues". It is true that a further notice after the shares are forfeited, is not necessary to complete the forfeiture of the shares (see Knight's case), but it is difficult to see how a person whose share is forfeited and whose name is struck out from the register can apply for rectification of the register until he comes to know of the forfeiture. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t are in their primary context unilateral acts. Waiver is the intentional relinquishment of a right or privilege. Abandonment is the voluntary giving up of one's rights and privileges or interest in property with the intention of never claiming them again. But except where statutory or other limitations intervene, unilateral acts never in themselves effect a change in legal status because it is fundamental that a man cannot by his unilateral action affect the rights and interests of another except on the basis of statutory or other authority. Rights and obligations are normally intertwined and a man cannot by abandonment per se of his rights and interests thereby rid himself of his own obligations or impose them on another. Thus, there can be no abandonment of a tenancy except on statutory grounds (as, for example, in the Central Provinces Tenancy Act, 1920), unless there is acceptance, express or implied, by the other side, It may, for example in a case of tenancy, be to the landlord's interest to keep the tenancy alive; and so also in the case of shares of a company. It may be to the interests of the company and the general body of shareholders to refrain from forfeiture if, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in specified ways. It is in my view fundamental that the legal title to property, whether moveable or immoveable, cannot pass from one person to another except in legally recognised ways, and normally by the observance of certain recognised forms. Confining myself to the present case, one of the ways in which the title to shares can pass is by forfeiture; but in that case an exact procedure has to be followed. A second way is by transfer which imports agreement. There again there is a regular form of procedure which must be gone through. A third is by estoppel though, when the position is analysed, it will be found that it is not the estoppel as such which brings about the change. The expressions, abandonment, waiver and so forth, when used in a case like the present, are only synonyms for estoppel and despite hallowed usage to the contrary, I prefer to call a spade a spade and put the matter in its proper legal pigeon-hole and call it by its proper legal name. These other terms are, in my view, loose and inaccurate and tend to confuse, when applied to cases of the present nature. A man who has a vested interest and in whom the legal title lies does not, and cannot, lose that title ..... X X X X Extracts X X X X X X X X Extracts X X X X
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